For China Solar, Tariffs Set to Return After Commerce Findings

China’s multinational solar manufacturers have been circumventing tariffs by shipping and assembling in southeast Asia, bound for the U.S. green energy market, Commerce found last week.

The U.S. Commerce Department said that southeast Asian subsidiaries of China’s BYD Hong Kong, Trina Solar Co Ltd, Vina Solar, and Canadian Solar were circumventing tariffs on Chinese solar cells and panels by only doing “minor processing work” on the equipment in Southeast Asia.

China’s solar companies are subject to anti-dumping duties (AD/CVD) imposed in the Obama years, and the Section 201 solar safeguard tariffs imposed under Trump and partially renewed under Biden.

AD/CVD orders are designed to provide relief to U.S. domestic industries when they are facing unfair competition. Massive subsidies, weak currencies, almost no profit motive, and in some cases, the potential for the use of slave labor in Xinjiang, all add to the already beneficial low labor costs and less restrictive environmental regulations U.S. producers are forced to compete with when dealing with rivals in China. Tariffs are a way of putting a price tag on those producer benefits from low-cost manufacturers like China. Circumvention of tariffs threatens to undermine U.S. trade policy. It directly impacts the U.S. solar industry at a time when the government is pushing for the decarbonization of the electric power grid.

Commerce’s determination means those four companies will be subject to duties on all solar goods they ship to the U.S. from Malaysia, Cambodia, Thailand, and Vietnam – countries that now account for about 80% of U.S. solar imports. They will face the same import duty rates already assessed on mainland China solar products, Commerce officials said, noting that most of those rates are below 35%.

However, the new tariffs will not kick in until June 2024 thanks to a two-year waiver given to all Southeast Asian solar makers by the Biden administration earlier this year. This waiver is in relation to a dumping charge brought on by Auxin Solar, a small U.S. solar panel manufacturer in California.

“Commerce’s investigations have largely validated and confirmed Auxin’s allegations of Chinese cheating,” Auxin Chief Executive Mamun Rashid said in a statement.

Biden should remove the two-year waiver, which was granted following intense lobbying by importers that managed to convince the White House that the tariffs would hurt the government’s solar initiatives. Some Chinese companies were holding up shipments, driving up prices temporarily. At the same time, the import lobby was busy trying to kill the Commerce Department’s anti-dumping and circumvention investigation into Southeast Asian solar. They succeeded only in putting a lid on Auxin’s anti-dumping case at Commerce. That waiver meant that even if companies were found to be circumventing duties by importing from China and maybe screwing a few parts together to pretend it was made in Vietnam, the government would not be able to impose new duties for two years.

Solar companies will always find it easier to manufacture in Asia. Better trade policies and regulations are the only things that will make “green energy” local energy. If not, China becomes America’s single source of solar, a veritable Green OPEC.

In August, President Biden signed the Inflation Reduction Act into law to counter this Asia-centric reality for new, clean energy technologies. The law came with production tax credits and other incentives for domestic solar manufacturers. In mid-November, First Solar announced a $1.1 billion investment in a new solar factory in Alabama.

“The passage of the Inflation Reduction Act of 2022 has firmly placed America on the path to a sustainable energy future,” Mark Widmar, chief executive officer of First Solar said in a press release.

A final decision on the tariff rates for those four Chinese solar companies in May, Reuters reported. When that day comes, the Biden administration should remove the beneficial waiver for those four manufacturers. The original reason for the waiver was hold-ups at Southeast Asian ports due to the Auxin Solar dumping investigation, and perennial fears by the climate lobby that the U.S. would not have the solar capacity it needs. Hanwha Q Cells, Jinko and others were not found to be circumventing, meaning solar importers will be hard-pressed to convince Washington that new duties will stifle business. Keeping the waiver rewards bad trade practice, a practice that nearly destroyed the U.S. solar industry, until tariffs were put in place. Barring massive subsidies subject to the whims of DC politics, there will be no future U.S. solar without tariffs.

“It is time for the Biden administration to rescind its Solar Emergency Declaration,” said Michael Stumo, CEO of CPA. “It is unconscionable that the White House continues to give Chinese manufacturers a pass for violating U.S. trade law to the detriment of American companies and American workers.”

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